Buying Short Sales

How to Buy a Kauai Short Sale in today’s market?
There are no easy answers, but using a Buyers Agent who is experienced with Short Sales is extremely helpful. As an experienced Short Sale listing agent, I help my buyers structure an offer that’s attractive to the lenders. Every bank is a little different, and my first-hand insights as to possible risks and delays help ease the process. To get you started….

Top 5 Tips for Buying a Short Sale on Kauai:

Asking Price is an estimate. Sellers agents don’t know what the bank will accept when they start to market the property. The lender won’t respond with an approved price until they have reviewed the sellers’ financials and formally respond to your offer. If there’s a pending auction, the listing agent may price the property low just to solicit offers. Work with your buyers agent to understand what the “market value” of the property is. Although lenders are motivated to work with short sales vs. foreclosure, they will want to sell the property at a price close to appraised value.

Be Prepared. Lenders who receive your offer will require Proof of Cash Funds, and a strong pre-approval letter if using a loan. These should be submitted with your offer.

Research. Ask your agent to get you a Preliminary Title Report prior to making your offer. It will show liens, and pending court actions. Sometimes there may be two foreclosure actions in process – one from the lender, and another from the Condo Association for back fees. As a buyer, you need to know who you’re negotiating with, and what pending actions may impact the process.

Keep looking. The short sale process can be uncertain. It will take anywhere from 30-90 days to receive a counter offer from the lender. There’s nothing wrong with making multiple offers. You’ll want to stay on top of new opportunities during the initial waiting period. Work with your buyers agent to make sure you receive market reports and updates.

Be patient. If you love the property, it can be worth the wait. Overall, lenders are getting much better at their internal review process. Bank of America has made tremendous improvements in the past 6 months, for instance. On several of my short sales, we’re moving quickly through the initial phase which took 3 months last year.

To help you take a deep breath and relax, please know that Short Sale Buyers have multiple opportunities to cancel or withdraw their offers with no penalties;

During the initial short sale review period with the lien holders, you can withdraw your offer at any time. It just needs to be in writing to the listing agent.

Once you receive a response from the lien holders, you can re-negotiate price and terms, and/or cancel prior to acceptance.

If you accept the lien holder’s terms, an official escrow will be opened and the Purchase Contract timelines apply. The Hawaii standard Purchase Contract provides for an initial inspection period (Paragraph C51 on the contract) during which you can cancel in writing for any reason with no penalties.

The HAR Short Sale Addendum provides additional terms which allow both buyer and seller to cancel if the lien holders change terms after acceptance.